I Can't Make This Stuff Up

Part of my role at my company is dealing with institutional investors. That’s a pretty large sphere, ranging from pension funds to corporations to managed asset programs that are distributed to retail investors and so on. I thought I would share this particular story because it’s pathetic and funny at the same time (because if you can’t sit back and laugh at a situation every now and then, you’ll go mental!).

I called up a rather large financial services provider (who will remain nameless, sorry) that has a decent footprint in Canada. Their particular model involves culling the universe of investments (stocks, bonds, mutual funds, etc.) down to a fairly small list that their advisors are authorized to put in client accounts. I was initiating a conversation to discuss the inclusion of index products (our index funds, natch) and as soon as I mentioned the word index the (rather high up) product approval officer immediately stopped me and indicated that they “do not believe in indexing” and that there was no point in continuing the conversation.

Apparently, the mountains of peer-reviewed, empirical evidence on the benefits of indexation carry no weight with a rather large provider of portfolio management and financial planning in Canada. Would it be overkill if I started quoting passages from Martin Luther King, Jr.’s “I have a dream” speech?

Thankfully, not all conversations are like that. Pension fund managers incorporate indexation strategies fairly ubiquitously and are a joy to speak to.

@Mark – Thanks for the laugh. As an FYI, our index fund lineup pays trailers to advisors. It will be decades before by the hour advice is mainstream, so until then I think index mutual funds are a great alternative for investors (as most retail investors go through advisors in Canada).

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